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Cash Commentary – April 5th, 2012

After weeks of delving into corn and soybean basis we turn our attention to Chicago and Kansas City wheat. With the first crop progress report of the year released this week we see that the winter wheat crop is shaping up well so far. Currently, 58% of the crop is rated good to excellent, an increase of around 21% from last year. Not only is the crop looking better this year but there is also an estimated 41.7 million acres being planted. According to the prospective planting report released at the end of last month, winter wheat acreage looks to increase by around three percent from 2011.

Chicago wheat new crop basis since the beginning of the year has been an average of 30 cents stronger than the maximum new crop basis levels seen in the last five years and 66 cents stronger than the five year average. Just within the last week new crop SRW basis moved up a penny. These strong basis levels still persist among futures prices that are right on target with the five year average.

Kansas City wheat new crop basis has not shown nearly the gains of SRW but is still sitting about 13 cents above the five year average. In the last seven days HRW new crop basis was up one and a half cents. Basis levels this year are considerably stronger than last year, up an average of 55 cents. Last year, futures prices for HRW were particularly strong, recording some of the highest prices seen in the last five years.

Strength in both the Chicago and Kansas City wheat cash markets, stem from decreasing grain stocks. According to the quarterly stocks report published March 30th, wheat stored in all positions is down 16% from last year. Current stocks are at the lowest they have been in the last three years at around 1.2 billion bushels.